The University of Adelaide RISK MANAGEMENT HANDBOOK

Transcription

1 The University of Adelaide RISK MANAGEMENT HANDBOOK

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3 CONTENTS PART A: Introduction 2 1. Risk Management Standard 3 2. Risk management - in general 4 3. Risk management - in the University context 5 PART B: The Risk Management Framework 8 4. Roles and Responsibilities 9 PART C: The Risk Management Process 5. Overview Step 1 - Establish the context Step 2 - Identify the risk Step 3 - Analyse the risk Step 4 - Evaluate the risk Step 5 - Treat the risk Monitor and review Communicate and consult 22 PART D: Resources Glossary University risk register University risk matrix 28 University of Adelaide, all rights reserved Page 1

4 PART A: INTRODUCTION The University undertakes teaching, research and commercial activities across a diverse spectrum of disciplines, fields and environments. This diversity of activity creates an equally diverse and complex range of risks as well as a wealth of opportunities for the University. Understanding and managing the risks associated with these activities and environments, and making the most of new opportunities, is challenging and critical to preserving and protecting the University s reputation, resources, and standing in the local, national and international context. The University has a statutory obligation for risk that is set out in The University of Adelaide Act. In addition, it recognises that risk management is an integral part of good governance and best management practice for an organisation charged with responsibility for the advancement of learning and knowledge and university education. The University s Risk Management Framework connects the University s governance structure and the management structure so that the two work together to provide a combined commitment, set of expectations, and organisational and personal accountabilities and responsibilities. The Council, the Audit Compliance and Risk Committee and the Vice- Chancellor and President, have ultimate responsibility for risk within the University. From this highest level of governance and management, each of the Divisions, led by the Vice Presidents, work with the Faculties, Schools and administrative areas so that risks are managed strategically and operationally. For the University s Controlled Entities, the Board and Senior Management of each entity takes responsibility for managing their risks. All activities of an organisation involve risk Organisations manage risk by anticipating, understanding and deciding whether to modify it. Throughout this process they communicate and consult with stakeholders and monitor and review the risk and the controls that are modifying the risk. The University has adopted the principles of risk management as set out in the International, Risk Management Standard - AS/NZS ISO 31000:2009 Risk Management Principles and guidelines. The Risk Policy formally affirms the University s strategic commitment to building a risk management culture in which risks and opportunities are identified and managed effectively. The University recognises that, in pursuing its strategic objectives, measured risk-taking is both acceptable and appropriate. The Risk Management Handbook provides details on the principles and processes identified in the Policy. The Handbook includes resources which have been designed to assist with the risk management process and to encourage a consistent and comprehensive language and approach to managing risk across the whole University. Throughout this handbook any reference to The University means and includes the University itself, its student body, all academic and professional staff, titleholders and contractors, and staff and employees of controlled entities. University of Adelaide, all rights reserved Page 2

5 1. Risk Management Standard The International Risk Management Standard AS/NZS ISO 31000:2009 (the Standard) provides the principles and guidelines for risk management. According to the Standard, the success of risk management will depend on the effectiveness of the management framework providing the foundations and arrangements that will embed it throughout the organisation at all levels. Within the Standard the expressions, risk management and managing risks, are both used. In general terms: risk management refers collectively to the principles, framework and process for managing risks effectively, and managing risks refers to the application of these principles, framework and process to particular risks. The University adopts the principles of risk management as set out in the Standard and actively works towards complying with these principles to ensure that risk management is effective. Principles of Risk Management: Create and protect value Are an integral part of all organisational processes Is part of decision making Explicitly address uncertainty Are systematic, structured and timely Are based on the best available information Are tailored for the internal and external context Takes human and cultural factors into account Is transparent and inclusive Is dynamic, iterative and responsive to change Facilitates continual improvement of the organisation Compliance with the principles will deliver or ensure that: The University can demonstrably pursue its strategic objectives in research, learning and teaching, commercial undertakings and community engagement. Risk management principles and practices are embedded into governance, enterprise and operational strategy, planning and management, policies, values and culture. Each individual recognises the statutory mandate for risk management that is led by the Council, its Standing Committees, the Vice-Chancellor & President, and senior executive so that all decision-makers make informed choices, prioritise actions and recognise options and alternative courses of action and their consequences. In taking account of uncertainty, decision-makers have regard for context and use knowledge, evidence and judgment to treat or mitigate risk. The University s approach to risk pursues both effectiveness and efficiency to achieve consistent, comparable and reliable results. In using their judgment and discernment, decision-makers will consider available information, experience, forecasts and stakeholder feedback. Decision-makers consider the statutory and operational mandates, requirements and expectations of internal and external regulators, auditors, funders, governing authorities and agencies; and account for the University s strategic plans, risk profile and undertakings. The University recognises the capabilities, perceptions and intentions of external and internal people and communities that can facilitate or hinder the achievement of the University s objectives. The University engages with internal and external stakeholders and decision makers to ensure that risk management remains relevant and up to date. The University responds to the changing needs of the higher education sector, the student community, staff and business partners by continually self-assessing, monitoring and reviewing its risk profile and identifying new and emerging risks. The culture of risk management will continue to grow and mature across all areas of the University. Robust risk assessments and processes will encourage the identification and application of controls and treatments and result in better decision making and improved business practices. The University s commitment to a centrally managed risk register has improved transparency, and will continue to facilitate better reporting, and enhance continual improvement. For this reason, the University s Risk Register is a mandatory part of reporting and managing risk. While the principles of risk and the risk management process are generic and applicable to all fields of risk, the reporting, management and monitoring of specific types of risk varies across the University. In order for the University to meet its statutory obligations, all occupational health and safety incidents, injuries, hazards, near-misses and concerns, are reported to, recorded, assessed and managed by the Health Safety and Wellbeing team in the Human Resources Branch using its systems and processes. University of Adelaide, all rights reserved Page 3

6 2. Risk management - in general Organisations of all kinds face challenging natural, political, socio-economic and cultural influences that make their operating environments uncertain. These influences may impact on the extent to which objectives can be met. The University is not immune from risks and is required by statute 1 to manage risk. The effect this uncertainty has on the organisation s objectives is known as risk. 2 Risk management refers to the coordinated activities that an organisation takes to direct and control risk. Risk management can be value enhancing or value protecting or both. The actions, processes and controls put into place to manage risks that affect the achievement of the University s strategy are value enhancing; that is, they increase the potential for achieving strategic outcomes that add value to the University. The actions, processes and controls put into place to manage risks that have a negative consequence are value protecting; that is, they protect the value of the University by preventing or minimising the impact of negative events. The University is committed to effective and efficient planning, thinking and decision-making. Risk management helps organisations become more efficient and effective by improving forward planning and critical thinking, and enabling better-informed decision making. When the management of risk is effective it generally goes unnoticed. Conversely, when it is absent or fails, the impact is often highly visible and felt across the entire organisation rather than just at a school, branch or project level or by individual staff. The consequences may also be publically embarrassing, politically damaging or compromising to the University in some material way. For a University, brand and reputation are very important; damage to brand and reputation may be transient or long lasting and will almost certainly effect rankings, research funding, ratings, research partnerships, and public and political sentiment and support; it can impact student enrolments, staff morale and community engagement. Adopting good risk management ensures that an organisation can undertake activities in the knowledge that a) appropriate and adequate measures are in place to maximise the benefits, and b) appropriate and adequate measures are in place to minimising the negative or unanticipated effects of any of the risks or opportunities that are presented in the course of achieving organisational objectives. The principles and practices of risk management can be applied across an entire organisation, to its many areas and levels, as well as to specific issues, functions, projects & activities. 1 The University of Adelaide Act AS/NZS ISO 31000:2009 Risk Management Principles and guidelines; iv Introduction. University of Adelaide, all rights reserved Page 4

7 3. Risk management - in the University context The University faces many challenges and is influenced by internal drivers, such as the Beacon of Enlightenment Strategic Plan and the Enterprise Bargaining Agreement, and external influences such as: Political will and policy changes; Funding cuts; global economic instability, currency risks, financial sustainability and use of limited resources; Globalisation and the digital revolution: growing global business and political interdependence and the unending transformation of educational delivery; New choices and pressures for students and staff: increased student mobility and expectation in course content, delivery and environment; Any University that fails to apply risk management practices when making key operating and business decisions may appear less than diligent to outside funding bodies, Government agencies, commercial investors and industry increasingly fierce competition for research funding and in attracting the most qualified staff and the brightest students; Rising equipment costs and escalating pressures on researchers from grant agencies and the international ranking environment; Space and infrastructure constraints on existing services and impacting new initiatives; Environmental impacts: increasing pressures on the natural environment and the need to manage the environment to ensure long term sustainability and survival; Threats of campus exposure to violence and pandemics with negative impacts for student and staff enrolment and retention; exposure to pandemic infections increasing with frequency and ease of travel; Increasing scrutiny and demands for diligence, transparency and accountability; government regulation, monitoring and oversight; regular audits from external agencies (e.g. Auditor General, Commonwealth & State Department of Education, WorkCover SA) and a wide range of significant compliance requirements, both legislative / regulatory requirements and contractual obligations which scrutinise all aspects of the University s operations and demand compliance with best practice (e.g. NHMRC, TEQSA, ESOS & ERA, AQIS, the Ombudsman s Office, the Gene Technology Regulator). In addition Commonwealth and State funding bodies are increasingly seeking evidence of a demonstrable risk management system as part of their funding requirements and agreements. Without a demonstrable system, we are potentially putting at risk the relationships and funding associated with our learning, teaching and research opportunities, our commercial activities and our philanthropy and fundraising endeavours. Within the University environment, there are certain risks that have specific governance, management or reporting obligations; where that is the case, systems and processes have been implemented to ensure that there is a consistent approach to controlling these risks. Examples of these categories include: Workplace Health and Safety risks Financial risks Fraud risks Legal and compliance risks Ethics and integrity of research A demonstrable risk management system incorporates Risk profiles Risk assessments Treatment plans Results of monitoring & risk reviews Evidence of consultation & communication Good documentation / formal records In order for risk management to become part of everyday practices, each person needs to recognise and accept the role they play in identifying and managing risk within the University. University of Adelaide, all rights reserved Page 5

8 Understanding risk management in the University context who is it relevant to and why? The University context: why is risk management relevant? Role definition: who does what? University as an institution The University seeks to support its people doing their jobs while balancing the strategic & operational objectives, long term sustainability, external demands and various accountabilities it faces. 1. Operates in a context, sector and society which is: - challenging and changing; - competitive (funding & people); - global; - constantly being scrutinized; and - with expectations to lead by example. 2. Has high expectations and best practice standards placed on it by University Council and the community, or imposed by external regulators, funding bodies or collaborators/partners. 3. This complex environment and diverse activity requires active monitoring and adaptation both by the institution and within the institution (through its people). Executive Managers Responsible for particular aspects of the University operating environment Responsible for organisation-wide, strategic & operational issues Managing local business & operational issues Sometimes wear both hats (local and executive manager) 4. Ambitious goals increase the pressures on the institution. Responsible for the activities within their area Local Managers Doing a job, like the staff in their areas (eg research, teaching, or providing a service or resource) Local areas 1. Tight budgets make resourcing activities a complex balancing act. Schools find it hard to provide the essentials for teaching & research; service branches struggle to provide the quality of support to the academic community that they want & need to provide. 2. Increasing audit, monitoring and reporting functions requires diligence, coordination and good business practices. 3. Real and increasing exposure to personal legal liability for managers at all levels, as regulators seek to hold managers personally accountable for compliance issues under their direction or control. Academic staff Carry out the core functions of the University; ie learning & teaching and research Trying to help and facilitate others in their area do their job Staff Doing a job enabling the University to operate Professional staff Support & enable the core functions of the University (through provision of support, services & resources) University of Adelaide, all rights reserved Page 6

9 Objectives: how can risk management help? Outcomes: what can risk management achieve? Evidence and assurance: A formalised and structured risk management system and consistent processes and approach helps to demonstrate that decision making is effective; the evidence can be used to provide assurance of the University s diligence and good management to Council & external bodies Standardised reporting: making it easier to keep track of risks, their associated controls & treatments and to monitor progress over time Improve decision-making: Applying a commonsense approach to risk management will help to better inform decision-making processes, improve forward planning, lead to more meaningful strategic & operational planning, and encourage critical thinking in formulating new initiatives, activities or relationships RISK MANAGEMENT ENHANCES: - Good governance - Brand & reputation of the University and of individual managers and decision makers - Communication around risk issues and opportunities - Reliability of decisions and of outcomes - Decision-making - Ability and confidence to take on new opportunities while clearly understanding the risks involved RISK MANAGEMENT Sensible handling of problems Increased stakeholder confidence Improved accountability Measured risk taking Effective risk management Formulate more convincing and better substantiated proposals: a risk assessment must accompany business plans or propositions for funding increases or approval of projects, new activities or initiatives Practical approach to deal with problems or issues: by identifying what could threaten the achievement of your objectives (such as collaborative relationships, new initiatives or student activities) you can more effectively allocate time & resources to address those concerns Better manage activities where adverse events may arise such as field trips, travel, clinical placements, new initiatives, contracts with new partners, mergers & acquisitions Learn from previous mistakes and hopefully avoid the same issues or problems in future or at least be better prepared for the possibilities REDUCES: - Hasty, rash or poorly considered decisions - Uncertainty around objectives - Inconsistency in decision-making - Procrastination due to uncertainty - Adverse events or negative consequences; ie the unanticipated or unplanned - Embarrassment or discredit from poor outcomes Better informed decisions Efficient allocation of resources Opportunities maximised Everyone taking responsibility for risk University of Adelaide, all rights reserved Page 7

10 PART B: RISK MANAGEMENT FRAMEWORK A Risk Management Framework effectively integrates the process for managing risk into an organisation s overall governance, strategy and planning, management, reporting processes, policies, values and culture. The University of Adelaide Risk Management Framework: 1. Connects the mandate with the process. The mandate comes from the University of Adelaide Act and the Council and is expressed through and overseen by various standing and management committees such as the Audit Compliance and Risk Committee, whose terms of references explicitly address risk management, and the University Risk Management Committee. 2. Recognises the influence and expectations of various external funders/regulators/auditors and research collaborators, and through enterprise and operational risk and the internal audit program, connects those expectations and aspirations with what we do. 3. Seeks to influence existing culture to better manage risk and opportunity, having regard for our economic, social, regulatory, political and competitive environment locally, regionally and internationally in alignment with our strategic objectives. The University Risk Management Framework is comprised of, and informed by, the following parts Risk Policy: the cornerstone document of the Framework that formally outlines the policy principles, procedures and individual and institutional responsibilities, requirements and structures imposed by government and regulatory authorities and agencies, funding bodies, underwriters and insurers (including WorkCover) professional standards and accrediting bodies, ethics committees and affiliated organisations. Risk Management Handbook: designed to be read in conjunction with the Policy and to guide, direct and assist everyone to better understand the principles of risk management and to adopt consistent processes for managing risks. University Risk Register (URR): principle repository for risks across the University and its Controlled Entities. The risk register enables areas to profile risks, monitor controls and prioritise treatment actions. The risk register also facilitates standardised reporting of risks within the approved University governance framework and reporting to external bodies such as government funders, regulators, auditors, accrediting bodies and ethics committees. University risk centre (i.e. the Legal & Risk Branch of the Division of Services and Resources): responsible for coordinating and facilitating the University s risk management program, including the regular monitoring and review of risks and formal reporting within the approved governance framework and, at any time requested, to the Vice-Chancellor & President. University Risk Management Committee (URMC): responsible for overall co-ordination of risk management within the University. Regular monitoring and review: on a regular and as needs basis, to enable the University to confirm that risk management is relevant, effective, sustained and facilitates the achievement of its objectives. Formal reporting: the University is required to report to various internal and external bodies; to achieve this, the University needs to be informed and actively managing risks on a regular basis and in a timely manner. Formal risk reporting occurs via the University Risk Register or other approved formal report. University of Adelaide, all rights reserved Page 8

11 4. Roles and Responsibilities Every person who engages in University activities is impacted in some way by risks, so every person has an active role in being risk aware. This involves identifying, assessing and managing risks and opportunities in day-to-day decision-making and planning, as well as understanding and adhering to the reporting process within the University s governance framework. Certain people will be more active in the risk management process than others: all people who work for the University are encouraged to identify and report risks; senior staff and managers will help staff and students cooperate and comply with controls put into place by the University to mitigate certain risks; certain individuals within the University and within each of the Controlled Entities will monitor and review or formally report on risks; and others will carry out tasks, often in collaboration, to ensure that risks are treated or controlled. Everyone is expected to work individually and collectively towards the active promotion of a positive risk management culture within and across the University and its Controlled Entities. University Risk Management Responsibilities The University Risk Policy formally outlines the roles and responsibilities of all members of the University community. The responsibility for risk management and monitoring across the University is as follows: All academic & professional staff, titleholders and contractors of the University Comply with risk management processes and practices in accordance with this Policy and the Risk Management Handbook. Co-operate with designated University risk specialists (including but not limited to Legal and Risk Branch and the HSW Team in the Human Resources Branch). Report risks through the University Risk Register. NB: Health safety & welfare issues are assessed and recorded in accordance with the HSW Policy and Handbook. HSW related risks will be reported through the University Risk Register by Human Resources where and when it is appropriate to do so. University Risk Centre (within Legal & Risk) Academic Units (Heads of School) & Administrative Units (Branch Managers) Co-ordinate the University s Risk Management program in accordance with best practice and the Risk Management Handbook. Manage the University Risk Register. Facilitate the reporting process for internal and external bodies/stakeholders. Foster and encourage an environment where managing risk is accepted as each person s day-to-day responsibility. Ensure that the principles and practices of risk are communicated and embedded into strategic and operational practices and planning processes. Notify extreme risks to the Executive Dean or the relevant Vice President(s). Update progress on risks as requested. Report annually, to the Executive Dean or the relevant Vice President, on the School/Branch risk profile using the University Risk Register or other approved formal report. University of Adelaide, all rights reserved Page 9

12 Executive Deans Vice-Presidents Vice-Chancellor & President Manage risks within the Faculty and Schools and other associated areas such as Research Institutes. Monitor and review compliance with the Risk Policy. Notify extreme risks to the Convenor of the University Risk Management Committee (for reporting through that Committee to the Vice-Chancellor and President). Update progress on risks as requested by the University Risk Management Committee and/or the Associate Director Risk Services. Report annually to the University Risk Management Committee on the Faculty s risk profile using the University Risk Register or other approved formal report. Manage risks within the Divisions and Branches. Ensure that adequate resources are available to implement the Risk Policy and to monitor and review risks in accordance with the Risk Management Handbook. Notify extreme risks to the Convenor of the University Risk Management Committee (for reporting through that Committee to the Vice-Chancellor and President). Update progress on risks as required by the University Risk Management Committee and/or the Associate Director Risk Services. Report annually to the University Risk Management Committee on their Division s risk profiles using the University Risk Register or other approved formal report. As the principal academic and chief executive officer of the University, the Vice-Chancellor and President is responsible for the academic standards, management and administration of the University, including risk (refer to The University of Adelaide Act 1971 Section 8 Powers of the Vice-Chancellor). Ensure that the principles and practices of risk are communicated to staff and embedded into strategic and operational practices and planning processes. Foster and encourage an environment where managing risk is accepted as the day-to-day responsibility of all individuals. Staff and employees of Controlled Entities of the University are also responsible for adopting the principles of risk management as follows: All staff & employees of Controlled Entities Chief Executives or General Managers of Controlled Entities Comply with risk management processes and practices in accordance with this Policy and the Risk Management Handbook. Co-operate with designated University risk specialists (including but not limited to Legal and Risk Branch and the HSW Team in the Human Resources Branch). Report risks through the University Risk Register. Manage risks within the Controlled Entity. Implement the Risk Policy and monitor and review risks in accordance with the Risk Management Handbook. Notify extreme risks to the Convenor of the University Risk Management Committee (for reporting through that Committee to the Vice-Chancellor and President). Report annually to the Associate Director Risk Services (for reporting through to the University Standing Committees) and in a time and manner prescribed. Controlled Entities regularly report to the University. University of Adelaide, all rights reserved Page 10

13 The responsibility for overseeing and monitoring the assessment and management of risk across the University is ultimately held by the University Council but may be delegated to any of the Standing or Management Committees to actively manage. The University Risk Policy outlines these responsibilities as follows: University Risk Management Committee Under the Terms of Reference the Committee s responsibility is to: Oversee the University s Risk Management program. Advise on risk strategy, policy and operations. Provide risk reports to the Vice-Chancellor & President, Audit Compliance and Risk Committee, Council and other agencies/stakeholders as required. Audit, Compliance and Risk Committee University Council Under the Terms of Reference of the Committee s Charter, Section & 5.1.8, the Committee is to: Identify and monitor the exposure of the University and its subsidiaries to environmental, occupational health, welfare and safety risks and all other operational risks, including financial and business risks, and risks associated with litigation, conflicts of interest, fraud, theft and third-party liability (5.1.6), and Monitor and review the policies and procedures of the University and its subsidiaries with respect to financial and other operational controls relating, including but not limited to, the risks referred to in 5.1.6, the appropriate and effective exercise of delegated authority and the reporting of significant risks, however arising, to Council (5.1.8). Council is responsible for overseeing and monitoring the assessment and management of risk across the University (refer to The University of Adelaide Act 1971 Section 9 Council as governing body). University of Adelaide, all rights reserved Page 11

14 PART C: RISK MANAGEMENT PROCESS 5. OVERVIEW Risk management is no longer special or optional: it is a necessary consideration each time we make a decision whether to develop a relationship, start a project or hold an event. It is required for good quality outcomes. We must constructively align our activities and decision-making with objectives and outcomes that help us reach our strategic goals or successfully execute our operational plans. This is risk management. To manage risk we apply the standard in the way described here. It takes into account the unique and special environments in which we work. The risk management steps include: Establish the context Risk Assessment Step 1: Establish the context: Define the scope of enquiry/objectives: ie what activity, decision, project, program, issue requires analysis Identify relevant stakeholders/areas involved or impacted Internal and/or external environment/ factors Communication and consultation Risk identification Risk analysis Risk evaluation Monitoring and Review Step 2: Identify the risk: Identify / assess What could happen? How and where it could happen? Why it could happen? What is the impact or potential impact? Step 3: Analyse the risk: Identify the causes, contributing factors and actual or potential consequences Identify existing or current controls Assess the likelihood & impact/ consequence to determine the risk rating Step 4: Evaluate the risk: Is the risk acceptable or unacceptable? Does the risk need treatment or further action? Do the opportunities outweigh the threats? Risk treatment Step 5: Treat the risk: If existing controls are inadequate identify further treatment options Devise a treatment plan Seek endorsement & support for treatment Determine the residual risk rating once the risk is treated Communicate & consult: at all stages of the process Ensure those responsible for managing risk, and those with vested interests, understand the basis on which decisions are made, why particular treatment options are selected or why risks are accepted/tolerated Monitor & review: continually check Effectiveness of risk controls and/or treatments Changes in context or circumstances, and Document & report this activity accordingly University of Adelaide, all rights reserved Page 12

15 6. Step 1: Establish the context Establish the context by identifying the objectives of the project, event or relationship and then consider the internal and external parameters within which the risk must be managed. The risk management process applies equally to risks that arise at an enterprise wide or strategic level, at an operational or day-to-day business level or for new partnerships, projects and new initiatives. Any proposed partnership, project or initiative should actively consider risk and document the assessment formally. It is recognised that specific and fit for purpose processes may be established to assess and manage the specific risks of an individual project or initiative but that further risk management work is required when the project moves to an operational level. Identify the purpose and objectives right at the beginning; focus on this at the outset of the risk assessment to avoid being overwhelmed by details and data. The Process: Set the scope for the risk assessment by identifying what you are assessing is it a new partnership, program, project or perhaps an event? Define the broad objectives. Identify the reason for the risk assessment perhaps a change in law, a request from an external auditor or regulator, an operational change or review. Identify the relevant stakeholders. Aim for an appropriately inclusive process from the outset: be sure to identify the areas that are, or might be, impacted and seek their input. Make sure that appropriate delegations are being exercised even at this early stage. Gather background information. Having proper information is important. Ask the right people and identify the information that is available. Sometimes it is useful to identify information that is not available (immediately) but may be necessary. Consider: Strategic & business plans Audit reports, inspections, site visit reports Personal experience (of staff, students, others) Corporate knowledge & institutional memory Previous event investigations or reports Surveys, questionnaires and checklists Insurance claim reports Local or international experience Expert judgment (internal University expertise &/or external expertise) Structured interviews Focus group discussion Historical records Where possible, consider both the strategic context and operational context, so that a complete picture is obtained. Establishing the context sets the framework within which the risk assessment should be undertaken, ensures the reasons for carrying out the risk assessment are clearly known, and provides the backdrop of circumstances against which risks can be identified and assessed. The next three steps Identify the risk, Analyse the risk and Evaluate the risk - form the Risk Assessment phase of the of the risk management process. University of Adelaide, all rights reserved Page 13

16 7. Step 2: Identify the risk Identify the risks that might have an impact on the objectives of the University or relevant Faculty, School, Branch, area or entity. Identify sources of the risk, areas of impact, events (including changes in circumstances) and their causes and potential consequences. Describe those factors that might create, enhance, prevent, degrade, accelerate or delay the achievement of your objectives. Aim also to identify the issues associated with not pursuing an opportunity; that is, the risk of doing nothing and missing an opportunity. In identifying the risk, consider these kinds of questions: What could happen: what might go wrong, or what might prevent the achievement of the relevant goals? What events or occurrences could threaten the intended outcomes? How could it happen: is the risk likely to occur at all or happen again? If so, what could cause the risk event to recur or contribute to it happening again? Risk identification Involves identifying sources of risk, areas of impact, events and their causes and consequences. Where could it happen: is the risk likely to occur anywhere or in any environment/place? Or is it a risk that is dependent on the location, physical area or activity? Why might it happen: what factors would need to be present for the risk to happen or occur again? Understanding why a risk might occur or be repeated is important if the risk is to be managed. What might be the impact: if the risk were to eventuate, what impact or consequences would or might this have? Will the impact be felt locally or will it impact on the whole University? Areas of impact to consider include: education or research program/activity; human impact; service delivery; financial consequences; compromise to legal or contract compliance; and adverse impact on brand and reputation for failure to meet or achieve our strategic objectives. Who does or can influence this partnership, program, project or event? How much is within the University s control or influence? Make sure that those with delegations, control, influence, resources and budgets are at least informed if not actively involved. This becomes more important when considering the treatments for the risk (see below). Wherever possible, provide quantitative and/or qualitative data to assist in describing the risk or to support the risk rating. Sources of information may include past records, staff expertise, industry practice, literature and expert opinion. University of Adelaide, all rights reserved Page 14

17 8. Step 3: Analyse the risk Develop a detailed understanding of the risk. Once the risk has been identified and the context, causes, contributing factors and consequences have been described, look at the strengths and weaknesses of existing systems and processes designed to help control the risk. Knowing what controls are already in place, and whether they are effective, helps to identify what - if any - further action is needed. Process: Identify the existing controls determine what controls are already in place to mitigate the impact of the risk. Controls may be strong or weak; they can be measureable and repeatable. Controls may include legislation, policies or procedures, staff training, segregation of duties, personal protective measures and equipment, and structural or physical barriers (e.g. setting up IT firewalls or guards around machinery). Once the controls have been identified, and their effectiveness analysed, an assessment is made of the likelihood of the risk occurring and the consequence if the risk were to occur. This produces an accurate, albeit subjective, assessment of the level of risk - or risk rating - and helps in the next step to determine whether risks are acceptable or need further treatment. Assess the likelihood the likelihood of the risk occurring is described as rare, unlikely, possible, likely, or almost certain to occur. Assess the consequence the consequences or potential impact if the risk event occurred are described as insignificant, minor, moderate, major or extreme. Controls do not always require something special Often, controls are already present as a natural part of the management of an issue or area, or can be embedded into normal management practices. Example: Having a supervisor in a student lab session, having procedures in place and ensuring students have adequate instruction on safety issues, are all controls to minimise the risk associated with laboratory hazards. The assessment of likelihood and consequence is mostly subjective, but can be informed by data or information collected, audits, inspections, personal experience, corporate knowledge or institutional memory of previous events, insurance claims, surveys and a range of other available internal and external information. Rate the level of risk: use the University Risk Matrix (refer page 28 of the Resource section of the handbook or on line at to assess the likelihood and consequence levels; the risk matrix then determines whether the risk rating is low, medium, high or extreme. The University Risk Matrix also identifies the management action required for the various risk ratings. University of Adelaide, all rights reserved Page 15

18 9. Step 4: Evaluate the risk Decide whether the risk is acceptable or unacceptable. Use your understanding of the risk to make decisions about future actions. Decisions about future actions may include: not to undertake or proceed with the event, activity, project or initiative actively treat the risk prioritising the actions needed, if the risk is complex and treatment is required accepting the risk Whether a risk is acceptable or unacceptable relates to a willingness to tolerate the risk; that is, the willingness to bear the risk after it is treated in order to achieve the desired objectives. The attitude, appetite and tolerance for risk is likely to vary over time, across the University as a whole and for individual Faculties, Schools, Divisions, Branches and Controlled Entities. A risk may be acceptable or tolerable in the following circumstances: No treatment is available Treatment costs are prohibitive (particularly relevant with lower ranked risks) The level of risk is low and does not warrant using resources to treat it The opportunities involved significantly outweigh the threats A risk is regarded as acceptable or tolerable if the decision has been made not to treat it (in accordance with the next step, Step 5 Treating the risk ). It is important to remember that regarding a risk as acceptable or tolerable does not imply that the risk is insignificant. Risk attitude An organisation s approach to assess and eventually pursue, retain, take or turn away from risk Risk appetite The amount and type of risk that an organisation is willing to pursue or retain Risk tolerance An organisation s or stakeholder s readiness to bear the risk after risk treatment in order to achieve its objectives Risks that are considered acceptable or tolerable risks may still need to be monitored. When conducting a risk assessment, there are generally lots of potential consequences identified. This is not necessarily a problem as a number of these can be addressed by the risk treatments, or they may not need any specific action. The previous three steps described Identify the risk, Analyse the risk and Evaluate the risk - form the Risk Assessment phase of the risk management process. The Risk Assessment process is well suited to a structured and systematic approach. For complex or more widespread issues a facilitated workshop format involving participants with different perspectives is often helpful and using an experienced facilitator to lead the discussion can help provide another objective perspective. Facilitated workshops can be requested by contacting the Associate Director Risk Services in the Legal and Risk Branch (refer to the contact details in PART D: Resources). University of Adelaide, all rights reserved Page 16

19 10. Step 5: Treat the risk Ensure that effective strategies are in place to minimise the frequency and severity of the identified risk. Develop actions and implement treatments that aim to control the risk. Once the risk assessment phase is complete, identify the options for treatment if there are any; otherwise tolerate the risk. Where options for treatment are available and appropriate, record those treatment options as part of the risk treatment plan. Treatment options not applied to the source or root cause of a risk are likely to be ineffective and promote a false belief within the organisation that the risk is controlled. Risk treatment The process taken to modify the risk Process: Decide if specific treatment is necessary or whether the risk can be adequately treated in the course of standard management procedures and activities; that is, embed the treatment into day-today practices or processes. In assessing what treatments could be implemented, it is useful to consider ways in which standard practices already serve as a control, or ways in which those standard practices could be modified to adequately control the risk. Work out what kind of treatment is desirable for this risk determine what the goal is in treating this particular risk; is it to avoid it completely, reduce the likelihood or consequence, transfer the risk (to someone else such as an insurer or contractor) or accept the level of risk based on existing information? The type of risk treatment chosen will often depend on the nature of the risk and the tolerance for that risk. Identify and design a preferred treatment option once the goal of treatment is known. o o o o o If the goal is to reduce the likelihood or possibility of the risk, then you may need to adjust what is happening or might be planned: successfully altering the approach will depend on identifying the causes of the threat and the causal links between the threat and its impact both of which should have been identified in the risk assessment phase. If it is not possible to change the approach of the project or activity, then it may be possible to take some other intervening action to mitigate the event s occurrence or reduce the likelihood of the threat. Understanding the nature of the risk event and how it occurs will make it easier to identify any possible intervening actions that would operate to reduce the risk. Treatment options Avoid the risk by not starting or continuing an activity Take or increase risk in order to pursue an opportunity Remove the risk source Change the likelihood Change the consequence Share the risk e.g. through Insurance, contracts, financing Retain the risk by informed decision If the goal is to reduce the consequence or impact of the risk, then contingency plans might be required to respond to a threatening event if it occurs. This planning may be undertaken in combination with other controls that is, even if steps have been taken to minimise the likelihood of the risk, it may still be worthwhile to have a plan in place to reduce the consequences if the event actually occurs. If the goal is to share the risk, then involving another party, such as an insurer or contractor, may help. Risk can be shared contractually, by mutual agreement, and in a variety of ways that meet all parties needs. Any such arrangement should be formally recorded whether through a contract or agreement or by letter. University of Adelaide, all rights reserved Page 17

20 Sharing the risk does not remove our obligations and does not avoid us suffering consequential damage if something unexpected happens or something goes wrong. o o If the risk is so significant that the goal is to eliminate or avoid it altogether then the options are limited to changing the project materially, choosing alternative approaches or processes to render the risk irrelevant or abandoning the activity or partner or program. It is not often that a risk can be eliminated completely and balance is an important part of the risk assessment exercise (please note: this does not refer to safety type risks or hazards). Sometimes, a decision is made to accept or tolerate the risk, due to the low likelihood or minor consequences of the risk event, or the fact that the cost of effectively controlling the risk is unjustifiably high or that the opportunity outweighs the risk. The University acknowledges that in pursuing its strategic objectives measured risk taking is both acceptable and appropriate. However, in these instances the decision to accept risk should be carefully documented, so that a record is available for future reference (or evidence) if the risk does eventuate. Thought should also be given to contingency planning in order to deal with and reduce the consequences, should they arise. Evaluate treatment options and assess their feasibility relative to the tolerance for risk. Do the controls selected appear to have the desired treatment effect (that is, will they stop or reduce what they are meant to stop or reduce)? o Will the controls trigger any other risks? For example, a sprinkler system installed to counter fire risk may cause water damage, presenting a different risk requiring consideration or management. o Are the controls beneficial or cost efficient? Does the cost of implementing the control outweigh the cost that would flow from the event occurring without the control in place? Overall, is the cost of implementing the control reasonable for this risk? The cyclical process of treating a risk, deciding whether residual risk levels are tolerable and assessing the effectiveness of that treatment are all case-by-case assessments that depend on a good understanding of the risk and a focus on the end objective of the activity being assessed. Document the risk treatment plan. Once the treatment options have been identified, a risk treatment plan should be prepared (NB. These can be easily generated through the University risk register once a risk is recorded). Treatment plans should identify responsibilities for action, time frames for implementation, budget requirements or resource implications, performance measures and review process where appropriate. The review process should monitor the progress of treatments against critical implementation milestones. Implement agreed treatments. Once any options requiring authorisation for resourcing, funding or other actions have been approved, treatments should be implemented by those identified as having the responsibility to do so. The person assigned with the primary responsibility for the risk, is ultimately accountable for the treatment of the risk. Once the risk has been treated, assess the level of residual risk. Even when a risk has been treated and the controls are in place the risk may not be completely eliminated. The level of residual risk refers to the likelihood and consequence of the risk occurring after the risk has been treated. Once implemented, treatments provide or modify the controls. The residual risk rating is generally lower than the original risk rating otherwise the controls were not effective. The residual risk should be documented and monitored and reviewed. Where appropriate, further treatment might be prudent. Having a good awareness of residual risk is important in monitoring and reviewing risk on an ongoing basis. University of Adelaide, all rights reserved Page 18